Why Silver May be the Best “Portfolio Insurance” to Own in 2019

When it comes to measuring the salaciousness of different types of
investments, commodities – particularly silver – measure fairly low on that
scale. After all, silver is cheap and has always taken a backseat to its more
expensive sibling gold, which costs around $1,318 an ounce compared to silver’s
measly $15.81 an ounce as of this writing.

But silver’s inexpensive nature relative to its consistently
growing demand makes it a strong asset to hold in any form. Whether investors
own it through an ETF, trust, stock, or plain old-fashioned bullion, the
metal’s use across a broad range of sectors ensures demand will always rise in
the long term, despite short-term fluctuations in market prices.

Here’s why the white metal is more attractive than investors give
it credit for – and why owning it can insulate any portfolio from the market’s
short-term pressures…

While silver won’t offer the explosive short-term gains typical of
regular stocks, the metal has historically outperformed many of the major U.S. indexes
by a decent margin, which lends to its credibility as a healthy long-term
investment.

Over the last 20 years, the spot price of silver has nearly tripled
in value, climbing 181% from roughly $5.63 an ounce in February 1999 to $15.81
today. That demolishes the Dow Jones’s 10.5% gain over the same period, while
also handily beating the S&P 500’s 118% return.

Additionally, silver is one of the few assets that typically rises
in value during times of broader market volatility. This lends to its
reputation as a “safe haven,” a term used to define any investible asset that
serves as a hedge against a decline in stock prices. Other safe havens include
gold, bonds, and other risk-averse investments that market participants often
flock to when the Dow or S&P take a nosedive.

The most vivid proof of silver’s reliability during a market crisis
can be gleaned from the most recent recession that began in 2007. Back then,
the Dow Jones plummeted an abysmal 53% from the October 2007 peak to the March
2009 trough amid what some economists considered the worst financial crisis in
modern history. Even bonds, considered a more common safe-haven investment than
silver, saw yields plunge, with the 10-Year Treasury yield dropping from 4.65%
to 2.13% over the same period.

Meanwhile, as the stock market was stuck in a burning room, silver
prices soon experienced one of their largest bull rallies in history as
investors saw the metal’s incredible value as a hedge. Over the two-year period
between the crisis midpoint in October 2008 to October 2010, silver more than
doubled in value as prices skyrocketed an enormous 152%.

Despite silver’s meager 0.1% gain so far this year due to China’s
slowing economy – one of the world’s largest silver importers due to the
country’s massive solar energy initiatives – global demand for the metal is
expected to keep rising. Silver’s industrial use in semiconductors, solar
panels, alloys, and other tools essential to modern society ensure that the
metal’s demand always remains strong, but 2019 is expected to be a particularly
incredible year for silver demand.

While China’s solar industry drags its feet due to broader economic
struggles, other growing solar markets in India and Australia, among other
nations, are expected to pick up the slack. According to the Silver Institute,
additional capacity for photovoltaic (PV) cells – the primary ingredient of
solar panels that’s made of nearly 90% silver – will be above 100 GW per year
through 2022. This, the institute says, should translate into a 7% rise in the
U.S. silver price to $16.75 this year as market volatility pushes “investors to
look for alternative options such as precious metals, which will boost silver
investment.

The Different Ways to Invest in Silver

For the beginner investor, it may be difficult to decide where to
start when entering the silver market. However, there are three primary types
of silver investments that offer all of the same benefits: inexpensive buying
prices, safe-haven appeal, and long-term value.

The first and most obvious type of silver investment is physical
silver bullion. While silver bars may be the first image that comes to mind
when thinking of physical silver, they can often to be expensive to store in a
way that maintains their luster and value. For investors looking for less
cumbersome bullion, consider American Silver Eagle coins, which are guaranteed
by the U.S. Mint and can be easily stored in coin capsules.

Another type of silver investment that allows broad access to the silver market without the hassle of storing bullion are exchange-traded funds (ETFs). These are investment vehicles that provide exposure to either commodity prices or a broad basket of stocks. The most popular silver ETF that tracks the price of silver is the iShares Silver Trust (SLV), which backs itself with about $6 billion worth of silver bullion safely stored in London and New York vaults. Due to broader recognition among market participants as a listed equity on the New York Stock Exchange, SLV has been known to often outperform the spot price of silver. So far this year, SLV is up 2.1%, crushing silver prices by 20 to 1.

The third most commonly used type of silver investment are silver stocks, typically companies that mine, produce, and sell the silver. However, the safest and most reliable silver stocks are silver streaming companies, which make deals with silver mining companies to buy their production at a fixed price. That kind of agreement can give streaming companies the upper hand because they can buy silver at a discount if the price of silver suddenly jumps before they receive the miner’s supply. One prominent example is Wheaton Precious Metals Corp. (WPM), a Vancouver-based streamer that has outperformed both spot prices and SLV by climbing 9.4% this year.

The Bottom Line

While it may not be as appealing as a tech behemoth or Dow
component, silver has proven to be an exceptionally reliable investment time
and time again. It’s important to consider the different ways in which
diversifying a portfolio ensures the long-term strength of your money, and
investors would be hard-pressed to find a better way to diversify than
investing in silver bullion, ETFs, or stocks. The metal’s ability to withstand
enormous pressure in the broader market ensures that investors will have at
least one green spot in their portfolio if the Dow or S&P ever heads south
for an extended period.